Imagine a municipal bus that’s powered by an electric motor, crawling along the crowded streets of Beijing. What does this bus have in common with the Ronald Reagan Presidential Library in Simi Valley, California?

Or imagine offshore oil production platforms in the Gulf of Alaska or the North Sea. What do these offshore platforms have in common with a luxury ski resort near St. Petersburg, Russia?

When you first think of it, there’s not much commonality between a city bus in China and a large presidential library in the U.S. And how do you begin to compare an austere and remote offshore oil platform with a fancy resort in Russia? Heck, the Russian resort probably has chandeliers and Faberge eggs on the shelves.

What do these things have in common? Well, they all need power. More specifically, they all need electricity. And for one reason or another, they need or want the power source to be on-site and self-contained.

The Beijing bus happens to be an electric hybrid vehicle. A hybrid vehicle uses an engine to power an electric generator. The electricity from the generator powers a motor that turns the wheels. And the wheels on the bus go ‘round and ‘round.

But even better, this bus puts out ultra-low emissions. That’s because reducing engine emissions is critical in China, where pollution is so bad. The electricity that powers the bus comes from an on-board device called a “microturbine.” In the case of the Beijing bus, this is a small engine that burns compressed natural gas. The gas spins a turbine and generates electricity. And it moves that bus.

OK, but how is the Chinese bus similar to the Reagan Library? Well, the Reagan Library also gets its electricity from microturbines. There are 16 microturbines at the Reagan Library, delivering over 95% of the power that the large building uses. (Large? Hey, the Reagan Library houses an entire Boeing 707, the former Air Force One, in a gigantic hangar section.)

The microturbines at the Reagan Library burn natural gas. The gas comes from the regional pipeline system. So yes, the library buys natural gas. But it hardly ever has an electricity bill. Even better, the heat from the turbines actually gets recycled to run the library cooling system.

Yes, you read that right. At the Reagan Library, the heat runs the cooling system. I know it seems strange, kind of like Reaganomics did at first. But hey, it works. And the library has much lower electric costs than if it bought power from the Southern California grid. The microturbines eliminate all but a small electrical connection to the larger grid. The process is highly efficient.

And how about that ski resort near St. Petersburg? It too is off the electric grid. But without a reliable source of power, the Russian resort is out of business. So the resort uses a series of microturbines that burn natural gas (and it being Russia, sometimes kerosene). These microturbines are the sole source of power and heat for a luxury hotel and other facilities like chairlifts and water pumps.

Out in the Gulf of Alaska and the North Sea, many offshore platforms now obtain power from rugged microturbines. These platforms are no ski resorts or stately libraries. These platforms are serious industrial facilities, exposed to salt water and the heaviest storms that Mother Nature can blow at them. And there are earthquakes in Alaska.

Traditionally, almost all offshore platforms have used diesel generators to crank out power to run the on-board systems. Things like oil pumps, lighting and signaling devices, and crew quarters. This requires that the platform operators send out diesel fuel by barge to the platforms. Then they have to pump the fuel into holding tanks.

As you can imagine, hauling, pumping and storing diesel fuel at sea is a logistical pain in the neck. Not to mention it’s an oil spill waiting to happen. But now microturbine systems on the offshore platforms burn wellhead gas. That is, the microturbines burn natural gas that comes straight from the wells drilled into deep hydrocarbon formations. There’s no more diesel fuel handling. And the energy cost for an offshore platform is now a negligible element to the operators.

Oh, and by the way. In all four applications I just listed — bus, library, resort and offshore platform — the microturbines run almost continuously. They require maintenance about once per year. Maybe twice, just to be on the safe side.

So what’s going on with these microturbines? They are clean. They don’t need much maintenance. And you can use microturbines to run large buildings and industrial facilities, not to mention city buses in Beijing.

Well, this is nothing short of a new energy revolution. Microturbines are clean, green, energy-efficient and adaptable to a wide array of applications.

Whatever you want to do, you need power. When you are close to a power line, you can tie right in. But if you are off the grid, or if you just want to be more in control of your own destiny (like at the Reagan Library), you look for new ideas.

And one of the newest ideas is to use microturbines, or compact turbine systems.

Microturbines run at high speeds. They are compact (about the size of a large refrigerator) and put out a lot of power. Microturbines are “agnostic” when it comes to the fuel they burn. That is, you can power them with natural gas from the ground or even biogas from a landfill. Or you can use propane, butane, kerosene or just plain old diesel.

So when you boil it all down, microturbines deliver power and electricity with impressive efficiency, and very low levels of emissions. You can use a microturbine at a remote site like an offshore platform or a Russian ski resort. You can put one in the basement of a building like the Reagan Library to generate power on-site. Or you can run a city bus with a microturbine.

Sure, you need some sort of fuel to spin the turbine. But if you do it right you can free yourself from the grid and dramatically lower your total energy consumption and cost.

Until we meet again,
Byron King
August 26, 2008

Byron King

Byron King is the managing editor of Outstanding Investments and Energy & Scarcity Investor. These publications reach over 60,000 paid subscribers. He is also a contributor to the Daily Reckoning. King is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.

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